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when we were all flinging songs back and forth across on napster and limewire and
getting cease and desist letters from some suit at a record label or
alternatively trying to figure out how many 99-cent songs we could fit into our
monthly budget and our four gig ipod well much of that changed when spotify
started offering free internet music streaming in 2009 trying to appeal to
those who wanted a legal way to listen to their favorite artists without
spending buckets of money on drm protected tracks and appeal they did
less than 10 years later spotify now has 170 million active users and a library
of 35 million songs thanks to licensing deals with three of the biggest rights
holders in the music industry sony warner and universal and also merlin a
key agency that represents a large number of smaller more independent
artists i mean to say things have gone well would be an understatement they're
even listed on the new york freakin stock exchange and that's a
big deal but how exactly do they survive by taking something that costs money
music and giving it away for free okay
yes yes the obvious answer is advertising hence the guy shouting about
the sales event at the local car lot when you're just trying to chill out to
something mellow but they've also featured a premium subscription option
since 2008 that offers offline listening the ability to choose a specific song on
mobile and an ad-free experience similar to netflix's video streaming service
which launched the year before but unlike netflix spotify isn't yet
profitable although it is making enough to stay afloat okay but how does that
work well spotify brings in significant revenue from both advertising and
premium subscriptions but they also spend a great deal on licensing songs
people actually want to hear around 10 billion dollars so far something that's
actually been a source of some controversy you see even with these huge
sums of overall royalty fees the amount of money that goes to the record label
per playback can seem insultingly small with many rights holders only making
around three quarters of a cent each time someone listens to one of their tracks leaving only some portion of that
for the actual artist you can't even say they're making pennies per play in 2014
the situation escalated to the point that taylor swift very publicly removed
all of her songs from spotify though in fairness to them at t swift's level of
fame a solidly performing album could net five or even six figures per month
so we don't blame you for not feeling too bad for her and radiohead i mean
i'll feel bad for radiohead they're artists of course spotify's popularity
isn't only due to its vast song catalog it used to rely on its own servers and
peer-to-peer connections for content delivery but now much of spotify's
operations are handled through google cloud similar to how netflix uses amazon
web services instead of its own servers to process user requests and
recommendations which you can learn more about up here leveraging a large
redundant cloud service as well as storing its files in ogg vorbis which is
not a malicious alien race but a compressed format that takes up less
space than mp3 while maintaining quality has given spotify a reputation for being
a fast reliable streaming application at least so far
until they can figure out how to turn a profit their future will always be in
question but for now investors see enough potential to continue to fund
them maybe the plan is to pull a page out of netflix's book and launch their
own record label cutting out the middleman so both spotify and artists
could make more money hopefully they'll do this by the time techwiggy's debut album bite me drops
next year and trust me it's a real
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